Monday, December 10, 2012

Greece has an
'unsustainable' debt burden. - (www.cnbc.com)
As the troika of international creditors to Greece met on Monday to
finalize the next tranche of aid for Athens, one economist has warned that the
euro zone is likely to resolve Greece's immediate funding crisis with a
"sticking plaster" but fail to resolve the main issue: the
unsustainable debt burden. Debt restructuring is
"is likely to be a step too far for core politicians," Ben May from
Capital Economics said in a report on Monday, adding that the proposals so far
to lower interest rates or tweak growth targets for Greece were unlikely to
help the country in the long run. "The key point is that the deal [on
further financial aid] will only result in debt falling in the medium term if
the economic assumptions on which it is underpinned prove accurate," May
stated.

European bankruptcies may jump soon - (www.cnbc.com) New banking regulations may lead to an
increased rate of insolvencies, as banks are forced to focus on their capital
requirements at the potential cost of keeping “zombie” companies alive. The
relatively low rate of insolvencies in Europe since the credit crisis began has
been credited to central bank monetary easing, which has helped banks put off
foreclosing on some loans — a process known as forbearance. In recent months,
concerns have been raised about the number of so-called “zombie companies” this
has created, particularly in the U.K. These companies are thought to be kept
going because low interest rates mean that they can continue to pay off the interest
on their debts, but are not growing. They have been credited with helping to
keep employment rates higher than they should be in the current stage of the
economic cycle.

Greece's lenders fail again to clinch debt deal - (www.reuters.com) International lenders failed
for the second week to reach a deal to release emergency aid forGreece and will try again next Monday,
but Germany
signaled that significant divisions remain. Euro zone finance ministers, the
International Monetary Fund and the European Central Bank were unable to agree
in 12 hours of overnight talks in Brussels on how to make the country's debt
sustainable. They want a solution before paying the next loan tranche which is
urgently needed to keep Greece afloat.
Several European officials played down the delay, saying the disagreements were
technical and a deal would be reached when they meet again on November 26.

House prices nowhere near a bottom - (finance.yahoo.com) In recent months, most
economists have come to believe that U.S. house prices have finally bottomed
after a horrible five years of declines. Most of the major house-price indices,
including the monthly Case-Shiller report, have turned higher. And yesterday's Existing Home Sales report showed an
increase in the median house price of a startling and encouraging 11% year over
year. In the past couple of years, there have been periods in which house
prices have risen temporarily, only to soon begin falling again. These
"head fakes" caused many analysts and real-estate agents to
prematurely call the bottom. And they have likely left some home buyers and
investors sitting on losses that they didn't expect.

Merkel's day of reckoning as taxpayer haircut on Greece looms
- (www.telegraph.co.uk) Germany, Holland, and the
creditor states of northern Europe have not lost a single cent on eurozone
rescue packages, so far. They have lent money, at a theoretical profit. They
have issued a fistful of guarantees to Europe’s twin bail-out funds, covering
Greece, Ireland, Portugal, Spain, and soon Cyprus. They have taken on opaque
and potentially huge liabilities through the European Central Bank. Yet little
has disturbed the illusion that the euro is a free lunch for the surplus
powers. An assumption persists that the creditors will - and should - be spared
the consequences of flooding Southern Europe with excess capital. All the
losses in Greece until now have been
concentrated on those pension funds, insurers, and banks that stayed to the
bitter end, rewarded with 75pc haircuts for their loyalty.